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Wednesday, June 22, 2011

AVT Natural Productsis a stock discussed in many investor forums in recent times from a level of Rs.140/- onwards. This world leader in food grade marigold oleoresin is now trading around Rs.200/- . What catching the attention even after a sharp rise in stock prices in a weak market is the activity of its promoters. A V Thomas group is a reputed and well known group in South India and mainly engaged in plantation related businesses.In one sense, they are also known as a conservative group( about business) even if they have rewarded its share holders through continuous dividend payout and a bonus.It is surprise to see that such a group is very aggressively hiking their stake through open market purchases. There is nothing unusual in hiking stake by promoters from open market when market is in a weak situation and stock is available at cheap valuations.But here the story is something different. They have acquired substantial shares in last month around Rs.150/- through open market operations and now continuing their purchase even at Rs.200/- which is almost its life time high( after last bonus).There are many possibilities , Company's business is showing robust growth in recent times and its new marketing agreement with US basedKeminfor exclusive supply of marigold oleoresin is expected to bring big business to AVT. It is also known that the company is going to introduce some more value added products in near future. Currently , promoters are holding close to 70 % of the total equity of this company as per the March share holding pattern. But through the recent open market purchases it is expected to reach near 75 % . We can't predict whether there will be any de-listing offer is planned in future , but can't write off even this chance considering the history of this group . They came out with an open offer for their only other BSE listed company - Neelamalai Agro- in 2000 at a price of Rs.65 /- but fails to collect the required quantity at that time . Currently, Neelamalai is trading around Rs.386 /- . So anything is possible , let us wait and see ...

It is part of market and such volatility is giving lot of opportunities. We are always finding excuses for everything .But I strongly believe market is currently discounting the reduction in growth of our economy which will materialize in the next few quarters.On the other side crisis in Europe and US is decreasing the fund flow to emerging economies . If we take the case of our economy , our main problem is the rise of commodity prices which is taking away the purchasing power. In one sense , a not so long recession is good for Indian economy which will ultimately help to create a situation to think about reduction in interest rates and such a situation will help Indian stock market to move to the next orbit.But in between ,there will be some pain .Better to concentrate in good companies in SIP mode ,never leverage , avoid cos with higher pledge percentage for the time being.

Thank you VP ji for your excellent informationon current crisis. Just one question...In your experience, just how long does ittypically take for this high inflation episodeto play out? Thanks in advance..have a happy day...